When a new employee is being considered for a position within a company, the potential employer may require the person to have their credit check performed for various reasons.

For the employer, it’s a way to protect their company and their assets in the event that the employee has questionable activity on his or her record. An employer has a lot of money and resources invested in the company to risk it all by hiring an employee with a questionable past, right? Absolutely!

But shouldn’t the potential employee also have some type of recourse or protection against any issues that may arise from him having a credit check done on his record? Shouldn’t the employee at least know what he should expect if and/or when a credit check is launched on his record? Again, absolutely!

Reasons to Conduct a Credit Check

The employer can choose what they will to do with the information that they find on the credit check, but employees should at least know what they could reasonably expect to be divulged on a credit report. Many people mistakenly think that all a hiring credit checks report will give the employer is the number of their credit score, or, how much they owe in credit card bills.

This is not the sole reason(s) why employers launch credit checks.

An employer needs to have as much information about a candidate that they can so they can make an informed, knowledgeable decision. They can certainly check financial information, but they can also check last known residence information or even whether or not the employee has a criminal background.

With that however, the employee still does not have unlimited permission at will to check into an applicant’s background and lifestyle. Employees do have a right to privacy, therefore this is why some credit checks are limited in discovery, and even some areas are completely off limits to divulge any information (i.e., sealed records, etc.).

Employee Protection

With the Fair Credit Reporting Act in force, an employee must give the employer permission to access his or her credit file. If in the event the employer does not hire the employee based on something in his credit report, the employee has a right to that information and to know why his employment request was denied.

If an employee has a criminal record, this information too can also be divulged on a person’s credit history. The rules vary from one state to another, but to what degree the (if any) criminal past history has on the employee’s ability to their job is up to the discretion of the hiring employer. This is why it’s a good idea:

for employees to explain any questionable information on their credit history, or any information that can be misconstrued by the employer, and

for potential employees to explain to the employee how they plan to use the information that they discover on the credit check.

Just because there is questionable information on a credit check is no reason for either side to assume that there is criminal activity or underlying issues that would cause either side to feel a bit of mistrust from the other party. The best remedy to offset this potential problem is for both parties to be as honest and as upfront as possible during the interviewing period so that there are no surprises. It’s also good time for the employer to let the employee know that he can expect to have a credit check launched, and the employee can choose to opt out of the hiring process. This saves both sides a lot of time, money and valuable resources spent, only to have the candidate back out towards the end.